House passes estate tax repeal that could meet up with Clinton veto pen

June 9, 2000
Web posted at: 2:53 PM EDT (1853 GMT)

By Ian Christopher McCaleb/CNN

WASHINGTON (CNN) -- The House of Representatives has approved a Republican-championed bill that would completely roll back the 84-year-old federal tax on estates, despite the strong objections of the Clinton Administration and the likelihood of a presidential veto should it arrive at the White House in its current form.

The GOP bill to eliminate the so-called death tax passed the chamber by a vote of 279-136 early on Friday afternoon.

Motivated by their intentions to pass at least some targeted tax legislation during this election year, and unmoved by the administration's protestations -- including a sharply worded letter penned by the president that specifically threatened the bill with a swift veto -- the House's majority Republicans pushed ahead Friday morning with the debate, and drew proceedings to a close in just a handful of hours.

"The death tax is the wrecking ball of a life's worth of achievement and success," House Ways and Means Committee Chairman Bill Archer (R-Texas) said during a speech on the House floor. "It's time to bury the death tax."

"Americans don't believe the IRS should be operating a toll booth on the way to heaven," said Rep. Sam Johnson (R-Texas), also a member of the Ways and Means panel.

The Republican bill would reduce estate taxes over 10 years at an estimated cost of $105 billion out of the projected federal surplus.

Rep. Bill Archer	

The administration says the estimated cost of $50 billion a year to the federal government after the repeal is completed in 2010 would be untenable.

Supporters argued that the federal treasury would not be as adversely affected as detractors were estimating. The estate tax, Rep. Christopher Cox (R-California), argued, may already be a draw on federal accounts, because it encourages people to find ways to spend their accumulated wealth before death.

"How is it that it is in some instances cheaper to dispose of assets before death?" asked Rep. Kenny Hulshof (R-Missouri), a proponent of the bill.

Many who argued against the bill described it as a break for the wealthiest 2 percent of the population, and predicted it would drain so much money out of the government's coffers that priorities such as prescription drugs for Medicare recipients will never be realized.

"This should be titled the 'billionaires' protection bill,'" said Rep. John Olver (D-Massachusetts).

"You have given the wealthiest [portion] of the population a break, and now you are coming before the American people and saying, 'We don't have enough money to protect the sick and the old," said Rep. Bernie Sanders (I-Vermont).

Current law exempts $675,000 of a deceased person's estate from the federal tax, and $1.3 million for farms and small businesses owned by a decedent.

Even though the estates of only some 2 percent of all people who die are ever subjected to the tax -- many of them, of course, quite well off -- stories told by farmers and small business owners about their tax fears and the high costs of estate planning have proved politically compelling enough for the issue to move forward in Congress.

Elimination of the estate tax has remained on the House GOP leadership's agenda since the party took control of the chamber in the wake of the 1994 midterm elections.

An attempt to repeal the estate tax was featured in last year's $792 billion tax cut bill, which was vetoed by the president.

This year, Republicans have broken apart the contents of that bill, and have attempted to push portions -- such as this estate tax bill and a similar repeal of the marriage penalty tax -- through the chamber as separate bills.

Democrats argued on the floor Friday that the move to repeal the tax was nothing more than a political stunt, saying the bill stood little chance in the Senate, and no chances of survival at the White House.

In a letter dispatched to Capitol Hill late Thursday night, President Bill Clinton leveled a veto threat at the bill, saying he instead supports "targeted, fiscally responsible legislation to make the estate tax fairer, simpler, and more efficient," particularly in reducing its impact on some small businesses and family farms.

The president argued in his letter that the Republican plan carries costs that will rise exponentially, risking the extended solvency of the Medicare and Social Security plans, and the country's ability to pay down the national debt, among other fiscal priorities.

The president also wrote that the complete repeal of the estate tax would "undermine the progressivity, fairness, and integrity of the tax system."

The Republican plan, Clinton wrote, would also have an adverse effect on charity giving, since that is one way -- through bequests and gifts-- that estates now minimize their tax exposure.

White House spokesman Joe Lockhart repeated the president's assertions on Friday, saying, the measure would provide wealthy Americans with a tax break of up to $800,000 a year, and deserved to be subjected to some "truth in labeling."

Rep. Charles Rangel	

Reps. Charles Rangel (D-New York), the ranking member on Ways and Means, and Benjamin Cardin (D-Maryland), said on the House floor Friday that small business owners and farmers -- the two groups whose advocates argue are most adversely affected by the inheritance tax -- can be assisted in other ways.

The two aligned themselves with Rep. Charles Stenholm (D-Texas) to create an alternative to the Republican bill that would have been targeted toward farmers and small business owners, and would cost an estimated $22 billion over 10 years.

The alternative bill would provide an immediate 20 percent across-the-board deduction in the tax, and raise the $1.3 million exemption on farms and small businesses to $2 million, while raising the regular $675,000 exemption to $1.1 million in the short term, then $1.2 million by 2006.

Stenholm argued that his bill would provide immediate relief to farmers and business owners, rather than put them through an extended wait.

"[The Republican bill] would make small business owners and family farmers wait for 10 years to get the relief they would get on Jan. 1, 2001, with the Democratic substitute," Stenholm said.

The alternative bill, which was brought up on the House floor as part of the debate on the Republican bill, failed by a vote of 196-222.

In a moment of procedural intrigue, Rep. Lloyd Doggett (D-Texas), attempted to have the bill sent back to the Ways and Means Committee just before its final passage. Doggett, who presented a "motion to recommit" on the House floor, urged the committee to rewrite the bill to include a provision that would deny "gift tax" donations to certain types of political groups.

Individuals may give up to $10,000 in gifts every year tax free. That money may be given to family members or to some organizations. The groups targeted by Doggett are known as "527s."

House Majority Leader Dick Armey	

The so-called 527s, which get their name from a section of the tax code, can raise and spend unlimited amounts of money without naming their backers. The groups typically advocate specific issues, but can also support individual candidates.

"This is a moment Republicans and Democrats can vote 'yes,' to get these secret organizations to commit to full disclosure," said House Democratic Leader Richard Gephardt (D-Missouri).

Republicans objected -- despite Thursday night's surprising Senate vote in favor of a similar provision.

"This is an important issues that requires a much more dignified response from this Congress than what it is getting on the floor today," said Majority Leader Dick Armey (R-Texas).

Doggett's motion failed by a close vote -- 202-216.